<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
-------------------------------
Date of Report (Date of
earliest event reported): January 16, 1998
----------------
INTERMEDIA COMMUNICATIONS INC.
-----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 59-2913586
- -------------------------- ----------------------
(State or other jurisdic- (I.R.S. Employer
tion of incorporation or Identification No.)
organization
0-20135
------------------------
(Commission File Number)
3625 Queen Palm Drive, Tampa, Florida 33619-1309
- ------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (813) 829-0011
<PAGE>
Item 5. Other Events
- ---------------------
On January 16, 1998, Intermedia Communications Inc. (the "Company") sold
$50 million principal amount (the "Additional Senior Notes") of its 8 1/2%
Senior Notes due 2008 (the "Senior Notes") for aggregate gross proceeds of
approximately $50,000,000. Bear, Stearns & Co. Inc. and Salomon Brothers Inc,
the placement agents for the Company's private placement of $350 million
principal amount of Senior Notes that was completed on December 23, 1997 (the
"December Placement"), purchased the Additional Notes by exercising their over-
allotment option with respect to the December Placement.
The net proceeds from the sale of the Additional Senior Notes will be
used to fund up to 80% of the cost of acquisition or construction by the Company
of telecommunications related assets. A portion of the Company's expansion may
occur through acquisitions (utilizing cash or securities of the Company) as an
alternative to direct investments in the assets required to implement the
expansion.
The Additional Senior Notes sold in the Offerings will not and have not
been registered under the Securities Act or any state securities or blue sky
laws, and may not be offered or sold in the United States or in any state
thereof absent registration or an applicable exemption from the registration
requirements of such laws.
Item 7. Financial Statements and Exhibits
- ------------------------------------------
Although there is no requirement that the Company file financial
statements with the Securities and Exchange Commission (the "SEC") under Item 7,
the Company hereby files pro forma financial statements which give effect to
certain recent and pending acquisitions and recently completed financings,
including the exercise of the over-allotment option described in item 5 above
with respect to the sale of the $50 million principal amount of the Additional
Senior Notes.
(a) Pro Forma Financial Information
Unaudited Pro Forma Condensed Consolidated Financial Statements for the
Company are filed as part of this report.
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: January 21, 1998
INTERMEDIA COMMUNICATIONS INC.
------------------------------
(Registrant)
By: /s/ Robert M. Manning
----------------------------
Name: Robert M. Manning
Title: Senior Vice President and
Chief Financial Officer
<PAGE>
Intermedia Communications Inc.
Unaudited Pro Forma Condensed
Consolidated Financial Statements
The accompanying unaudited pro forma condensed consolidated balance sheet of
Intermedia Communications Inc. at September 30, 1997, and the related unaudited
pro forma condensed consolidated statements of operations for the year ended
December 31, 1996 and the nine month-period ended September 30, 1997 includes
the historical and pro forma effects of the March, July, October and December
1997 Offerings as well as the acquisitions of the Telecommunications Division of
EMI Communications Corporation (EMI), acquired in June 1996, certain assets and
related business lines of Universal Telcom Technologies, Inc. (UTT) and of
Netsolve, Incorporated (Netsolve) which were both acquired in December 1996, the
acquisition of DIGEX, Incorporated (DIGEX), which was consummated in July 1997
and the acquisition of Shared Technologies Fairchild, Inc. (STFI) which, while
not yet consummated, is believed by management to be probable of consummation
during the first quarter of 1998. The unaudited pro forma condensed consolidated
statements of operations have been prepared to reflect the aforementioned
offering and purchase transactions as if they were consummated at the beginning
of each period for which pro forma statements of operations are presented, and
at September 30, 1997 for the condensed consolidated balance sheet.
The pro forma effects are based on the historical financial statements of the
acquired businesses giving effect to the transactions under the purchase method
of accounting and the assumptions and adjustments described in the accompanying
supplemental notes. As such, the total cost of the STFI acquisition will be
allocated to the tangible and intangible assets acquired and liabilities assumed
based upon their respective fair values at the effective date of the STFI
acquisition. Such allocations and the related amortization periods will be
based on studies and valuations which have not yet been completed. Accordingly,
the allocations reflected in the pro forma financial data are preliminary and
subject to revision. As part of the purchase price allocation the Company is
evaluating the in-process research and development of STFI. If the
technological feasibility of the acquired technology has not been established
and the technology has no future alternative uses, such in-process research and
development will be written off. The Company has not yet begun to estimate an
amount, if any, of the in-process research and development for STFI that might
ultimately be written off.
The pro forma information is not intended to purport to be indicative of the
actual results or financial position that would have been achieved had the
acquisitions in fact been consummated at the beginning of each period presented
or at September 30, 1997. Such pro forma financial information should be read
in conjunction with the Consolidated Financial Statements and Notes of
Intermedia Communications Inc.
<PAGE>
Intermedia Communications Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
September 30, 1997
(In Thousands)
<TABLE>
<CAPTION>
HISTORICAL
(A) (B) PRO FORMA PROFORMA
CONSOLIDATED STFI ADJUSTMENTS TOTALS
-------------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 471,101 $ 178 446,950 (j) 547,279
(760,900) (c)
389,950 (n)
Short-term investments 491 491
Restricted investments 6,351 6,351
Accounts receivable, net 46,855 34,155 81,010
Prepaid expenses and other current
assets 4,316 8,696 13,012
--------- ------- -------- ---------
Total current assets 529,114 43,029 76,000 648,143
Restricted investments
Telecommunications and other
equipment 453,545 105,302 (37,234) (d) 521,613
Less accumulated depreciation (65,731) (37,234) 37,234 (d) (65,731)
--------- ------- -------- ---------
Telecommunications and other
equipment, net 387,814 68,068 - 455,882
Intangible assets, net 162,610 258,075 429,345 (e) 850,030
Other assets 6,647 1,070 7,000 (k) 24,767
10,050 (n)
--------- ------- -------- ---------
Total assets 1,086,185 370,242 522,395 1,978,822
========= ======= ======== =========
LIABILITIES, REDEEMABLE
PREFERRED STOCK AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 47,327 18,394 65,721
Other accrued expenses 28,257 16,582 44,839
Current portion of
long-term debt
and capital lease
obligations 3,882 16,083 (13,036) (f) 6,929
--------- ------- -------- ---------
Total current liabilities 79,466 51,059 (13,036) 117,489
Other noncurrent liabilities -
Long-term debt and capital 615,380 239,633 260,250 (l) 1,276,294
lease obligations (125,269) (f)
(113,700) (g)
400,000 (n)
--------- ------- -------- ---------
Total liabilities 694,846 290,692 408,245 1,393,783
Series B redeemable
exchangeable preferred stock
and accrued dividends 312,001 312,001
Series D redeemable
exchangeable preferred stock
and accrued dividends 170,109 170,109
Series E redeemable
exchangeable preferred stock
and accrued dividends - 193,700 (m) 193,700
Preferred Stock and Put
Warrants - 40,948 (40,948) (h) -
Stockholders' equity:
Common stock 171 70 (70) (i) 171
Additional paid-in capital 237,334 78,137 (78,137) (i) 237,334
Accumulated deficit (319,478) (39,605) 39,605 (i) (319,478)
Deferred compensation (8,798) (8,798)
--------- ------- -------- ---------
Total stockholders' equity (90,771) 38,602 (38,602) (90,771)
--------- ------- -------- ---------
Total liabilities, redeemable
preferred stock
and stockholders' equity 1,086,185 370,242 522,395 1,978,822
========= ======= ======== =========
</TABLE>
F-2
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(a) This column represents the historical consolidated balance sheet of
Intermedia at September 30, 1997.
(b) This column represents the historical consolidated balance sheet of Shared
Technologies Fairchild, Inc. (STFI)
(c) This adjustment represents the cash purchase price for STFI and other
expenditures as follows:
<TABLE>
<CAPTION>
<S> <C>
Purchase of 17,187,605 shares
of outstanding STFI common
stock at $15 per share. $257,814
Purchase and retirement of
outstanding STFI options,
warrants and convertible
preferred stock. 103,386
Purchase of STFI Special
Preferred Stock 22,000
Purchase of STFI Redeemable
Put Warrant 2,100
Purchase of STFI's 12 1/4%
Senior Subordinated Discount
Notes (including a premium
of $36,695). 175,000
Repayment of amounts
outstanding under STFI's
revolving credit facility. 113,700
Break-up and other fees 86,900
----------
$760,900
==========
</TABLE>
(d) This adjustment represents the elimination of STFI's accumulated
depreciation as fixed assets will be recorded at fair values, which the
Company believes approximate net book values on the date of acquisition.
(e) This adjustment represents the excess of the total purchase price for STFI
over the fair values of the net tangible and intangible assets acquired.
The balance, which is subject to further allocation, may be allocated to
customer lists and other identifiable intangibles based upon appraised
values, with the excess allocated to goodwill.
<TABLE>
<S> <C>
Cash purchase price $ 760,900
Book value of STFI's 12 1/4%
Senior Subordinated Discount
Notes purchased by the
Company (138,305)
Book value of STFI's
preferred stock and warrants
purchased by the Company (40,948)
Repayment of amounts
outstanding under STFI's
revolving credit facility. (113,700)
Net assets of STFI at
September 30, 1997,
including previously
recorded goodwill (38,602)
------------
Pro forma adjustment to
record additional goodwill
related to the STFI
acquisition $ 429,345
============
</TABLE>
(f) These adjustments reflect the elimination of STFI's 12-1/4% Senior
Subordinated Discount Notes purchased by the Company, net of the $36,695
premium.
(g) This adjustment reflects the repayment of amounts outstanding under STFI's
revolving credit facility by the Company.
(h) This adjustment reflects the retirement of STFI's preferred stock and put
warrants purchased by the Company.
(i) These adjustments represent the elimination of STFI's stockholders' equity
for proforma combining purposes.
(j) This adjustment represents cash proceeds of $193.7 million from the October
1997 Series E Junior Convertible Preferred Stock offering, and cash
proceeds of $253.3 million from the October 1997 issuance of 8-7/8% Senior
Notes due 2007.
(k) This adjustment represents the deferred finance costs of $7 million related
to the 8-7/8% Senior Notes Due 2007.
(l) This adjustment represents the sale of $260.3 million of 8-7/8% Senior
Notes due 2007.
(m) This adjustment represents the net proceeds from the sale of Series E
Redeemable Exchangeable Preferred Stock.
(n) These adjustments reflect the December 1997 sale of $400 million of 8-1/2%
Senior Notes due 2008 which yielded proceeds of $390 million, with deferred
finance costs of approximately $10 million.
F-3
<PAGE>
Intermedia Communications Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year ended December 31, 1996
(In Thousands, Except Per Share Data))
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------------------------ ----------- ---------
(B) (C) (D) (E) (F) PRO FORMA PRO FORMA
CONSOLIDATED EMI UTT NETSOLVE DIGEX ADJUSTMENTS SUB-TOTALS
-------------- ------- ------- ------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $103,397 $25,882 $ 4,812 $18,028 $ 15,573 $ (48)(g) $ 167,644
Costs and expenses:
Facilities
administration and
management and
line costs 81,105 24,331 4,331 12,084 16,020 (48)(g) 128,023
(9,800)(h)
Selling, general and
administrative 36,610 1,646 1,335 1,072 18,934 59,597
Depreciation and
amortization 19,836 1,931 40 - 2,855 (584)(i) 35,359
1,799 (j)
9,482 (k)
-------------- ------- ------- ------- -------- --------- ---------
137,551 27,908 5,706 13,156 37,809 849 222,979
-------------- ------- ------- ------- -------- --------- ---------
Income (loss) from
operations (34,154) (2,026) (894) 4,872 (22,236) (897) (55,335)
Other income (expense):
Interest expense (35,213) - (230) (30) (1,566) 260 (l) (118,295)
(81,516)(q)
Interest and other
income (expense) 12,168 118 - - 497 (10,759)(m) 2,024
-------------- ------- ------- ------- -------- --------- ---------
Income (loss) before
income taxes and
extraordinary item (57,199) (1,908) (1,124) 4,842 (23,305) (92,912) (171,606)
Income tax (provision)
benefit - 677 - - - (677)(n) -
------------------------------------------------------------------------------------------
Income (loss) before
extraordinary item (57,199) (1,231) (1,124) 4,842 (23,305) (93,589) (171,606)
Extraordinary loss on
early extinguishment of
debt
-------------- ------- ------- ------- -------- --------- ---------
Net income (loss) (57,199) (1,231) (1,124) 4,842 (23,305) (93,589) (171,606)
Preferred stock dividends
and accretions - - - - - (71,851)(p) (71,851)
-------------- ------- ------- ------- -------- --------- ---------
Net loss attributable to
common stockholders $(57,199) $(1,231) $(1,124) $ 4,842 $(23,305) $(165,440) $(243,457)
============== ======= ======= ======= ======== ========= =========
Net loss per share $(4.08) $(16.77)
============== =========
Weighted average number of
shares O/S 14,018 14,518 (o)
============== =========
EBITDA $(14,318) $(19,976)
============== =========
</TABLE>
<TABLE>
<CAPTION>
-------- ----------- ------------
(U) PRO FORMA PRO FORMA
STFI ADJUSTMENTS TOTALS (A)
-------- ----------- ------------
<S> <C> <C> <C>
Revenues $157,241 $ 324,885
Costs and expenses:
Facilities
administration and
management and
line costs 82,572 210,595
Selling, general and
administrative 39,799 99,396
Depreciation and
amortization 15,530 28,974 (r) 79,863
-------------- -------- --------
137,901 28,974 389,854
-------------- -------- --------
Income (loss) from
operations 19,340 (28,974) (64,969)
Other income (expense):
Interest expense (22,903) 11,525 (s) (129,673)
Interest and other
income (expense) (3,912) (2,024)(m) (3,912)
-------------- -------- --------
Income (loss) before
income taxes and
extraordinary item (7,475) (19,473) (198,554)
Income tax (provision)
benefit (783) (783)
---------------------------------------------
Income (loss) before
extraordinary item (8,258) (19,473) (199,337)
Extraordinary loss on
early extinguishment of
debt (311) (311)
-------------- -------- --------
Net income (loss) (8,569) (19,473) (199,648)
Preferred stock dividends
and accretions (2,366) 2,366 (t) (71,851)
-------------- -------- --------
Net loss attributable to
common stockholders (10,935) (17,107) (271,499)
============== ======== ========
Net loss per share $(18.70)
=======
Weighted average number of
shares O/S 14,518 (o)
=======
EBITDA $ 14,894
</TABLE>
F-4
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(YEAR ENDED DECEMBER 31, 1996)
(a) The unaudited pro forma condensed consolidated statement of operations for
the year ended December 31, 1996 does not give effect to any potential cost
savings and synergies that could result from the DIGEX or STFI acquisitions
in 1997 or the EMI, UTT and Netsolve acquisitions in 1996. The effect of
the write-off of intangible assets associated with the DIGEX acquisition,
consisting of in-process research and development (R&D) projects of $60
million, has not been reflected in the statement as it is a nonrecurring
charge. In addition, the effect of the extraordinary charge for loss on
extinguishment of debt of $43 million has not been reflected in the
statement as it is also a non-recurring charge. Finally, the Company has
not yet determined an amount, if any, that might ultimately be written-off
related to in-process research and development related to STFI, however,
any such nonrecurring charge would be excluded from the pro forma condensed
consolidated statement of operations.
(b) This column represents Intermedia's historical results of operations for
the year ended December 31, 1996, which includes the operating results of
EMI beginning July 1, 1996, and UTT and NetSolve beginning December 1,
1996.
(c) This column represents EMI's historical results of operations for the six
months ended June 30, 1996.
(d) This column represents UTT's historical results of operations for the
eleven months ended November 30, 1996.
(e) This column represents Netsolve's historical results of operations for the
eleven months ended November 30, 1996.
(f) This column represents DIGEX's historical results of operation for the year
ended December 31, 1996.
(g) This adjustment represents the elimination of intercompany sales between
Intermedia and EMI, prior to its acquisition.
(h) This adjustment represents a reduction of expense to eliminate the lease
costs for DIGEX'S duplicate network facility costs of $4.1 million and
unfavorable lease rates of $5.7 million.
(i) This adjustment represents a reduction in EMI's historical depreciation
expense as a result of the allocation of purchase price to fair values of
fixed assets acquired. In addition, these fixed assets are being
depreciated for pro forma purposes on a straight line basis using an
estimated weighted average remaining life of seven years versus original
estimated lives and accelerated depreciation historically followed.
(j) This adjustment represents the additional amortization expense that would
have been incurred had UTT and Netsolve been acquired at the beginning of
the year.
(k) This adjustment represents the additional amortization expense that is
expected to be incurred in connection with the DIGEX acquisition. For
purposes of the pro forma presentation, it is assumed that the excess of
the purchase price over the net tangible assets acquired will be allocated
to developed technology (5 year lives) and goodwill (10 year life). The
Company is investigating the amount and the appropriate amortization
periods for the intangible assets.
(l) This adjustment represents the elimination of interest expense on UTT's and
Netsolve's historical statement of operations for borrowings which were
retired at the aquisition by the proceeds of other borrowings by the
Company.
(m) Where acquisitions were paid all or partially in cash, interest income was
adjusted to reflect the absence of the cash or investments for the
appropriate period.
(n) Represents the elimination of the historical income tax benefit of EMI that
would not have been realized had the operations of EMI been consolidated
with Intermedia for the year.
(o) Includes the weighted effect of 937,500 shares issued in June 1996 for EMI
and 31,380 shares issued in December 1996 for UTT.
(p) This adjustment represents the preferred stock dividends and accretions
that would have been recorded if Intermedia's Series B, D and E preferred
stock had been outstanding for the entire period.
(q) This adjustment represents interest expense of $44.4 million on the 11-1/4%
Senior Discount Notes Due 2007 that were issued in July 1997 and $23.7
million on 8-7/8% Senior Notes due 2007 that were issued in October 1997
and $35 million on 8 1/2% Senior Notes due 2008 that were issued in
December 1997 (net of $21.6 million reduction of interest due to the
retirement of the 13-1/2% Senior Notes) as if the Notes had been issued on
January 1, 1996.
(r) This adjustment represents the additional amortization expense that is
expected to be incurred in connection with the impending STFI acquisition.
For purposes of the pro forma presentation, it is assumed that the excess
of the purchase price over the net tangible assets acquired will ultimately
be allocated to identifiable intangibles such as
F-5
<PAGE>
developed technology, customer lists and goodwill; with the weighted
average amortization period of 20 years. The Company will obtain valuations
and determine the appropriate amortization periods for intangible assets
and goodwill once the acquisition is consummated.
(s) This adjustment represents the elimination of interest expense in STFI's
historical financial statements related to the 12 1/4% Senior subordinated
Discount Notes purchased by the Company.
(t) This adjustment represents the elimination of preferred stock dividends and
accretions of STFI.
(u) This column represents STFI's historical results of operations for the year
ended December 31, 1996.
F-6
<PAGE>
Intermedia Communications Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Nine months ended September 30, 1997
(In Thousands)
<TABLE>
<CAPTION>
HISTORICAL
------------------------
(b) (c) PRO PRO (M) PRO PRO
FORMA FORMA FORMA FORMA
CONSOLIDATED DIGEX ADJUST- SUB TOTALS STFI ADJUST- TOTALS
MENTS MENTS
------------- ------- ------- -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 165,317 $ 19,646 $ 184,963 141,779 326,742
Costs and expenses:
Facilities, administration
and maintenance and line
costs 200,241 19,588 (7,060)(g) 212,769 56,831 269,600
Selling, general and
administrative 64,983 18,506 (374)(h) 83,115 51,536 134,651
Depreciation and amortization 34,274 3,390 7,112 (i) 44,776 14,294 20,829 (j) 79,899
--------- ------- ------- -------- ------ ------ --------
299,498 41,484 (322) 340,660 122,661 20,829 484,150
--------- ------- ------- -------- ------ ------ --------
Loss from operations (134,181) (21,838) 322 (155,697) 19,118 (20,829) (157,408)
Other income (expense):
Interest expense (39,895) (784) (56,989)(d) (97,668) (21,694) 11,781 (k)(107,581)
Other income (loss) 16,691 486 (7,680)(e) 9,497 (210) (9,497) (e) (210)
--------- ------- ------- -------- ------ ------ --------
Loss before income taxes and
extraordinary item (157,385) (22,136) (64,347) (243,868) (2,786) (18,545) (265,199)
Income tax provision (214) (214)
--------- ------- ------- -------- ------ ------ --------
Loss before extraordinary item (157,385) (22,136) (64,347) (243,868) (3,000) (18,545) (265,413)
Extraordinary loss on early
extinguishment of debt (43,834) (43,834) (43,834)
---------- ------- ------- -------- ------ ------ --------
Net loss (201,219) (22,136) (64,347) (287,702) (3,000) (18,545) (309,247)
--------- ------- ------- -------- ------ ------ --------
Preferred stock dividends and
accretions (27,118) (26,017)(f) (53,135) (3,689) 3,689 (l) (53,135)
Net loss attributable to common
stock $(228,337) (22,136) (90,364) (340,837) (6,689) (14,856) (362,382)
========== ======= ======= ======== ====== ======= ========
Net loss per common share $( 13.87) $(20.70) $(22.01)
========= ======= =======
Weighted average number of
shares outstanding 16,463 16,463 16,463
========== ======= ======
EBITDA $(99,907) $(110,921) $(77,509)
========== ======= ======
</TABLE>
F-7
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(NINE MONTHS ENDED SEPTEMBER 30, 1997)
(a) The unaudited pro forma condensed consolidated statement of operations
for the nine months ended September 30, 1997 does not give effect to any
potential cost savings and synergies that could result from the DIGEX or
STFI acquisitions. In addition, the Company has not yet determined an
amount, if any, that might ultimately be written-off related to in-
process research and development related to STFI, however, any such
nonrecurring charge would be excluded from the pro forma condensed
consolidated statement of operations.
(b) This column represents the historical results of operations for the nine
months ended September 30, 1997.
(c) This column takes into effect the operating results for DIGEX for the six
months ended June 30, 1997.
(d) This adjustment represents interest expense of $23.9 million on the 11-
1/4% Senior Discount Notes Due 2007 that were issued in July 1997 and
$17.6 million on 8-7/8% Senior Notes due 2007 that were issued in October
1997 and $26.3 million on 8-1/2% Senior Notes due 2008 that were issued
in December 1997 (net of $10.8 million reduction of interest due to the
retirement of the 13-1/2% Senior Notes) as if the Notes had been issued
January 1, 1997.
(e) Where acquisitions were paid all or partially in cash, interest income
was adjusted to reflect the absence of the cash or investments for the
full year.
(f) This adjustment represents the preferred stock dividends and accretions
that would have been recorded if Intermedia's Series B, D and E preferred
stock had been outstanding for the entire period.
(g) This adjustment represents reduction of expense for the reversal of
certain assumed liabilities in connection with the DIGEX acquisition
related to duplicate facility costs of $4.2 million and unfavorable lease
rates of $2.8 million.
(h) This adjustment represents the reversal of DIGEX's deferred compensation
amortization for the period.
(i) This adjustment represents the additional amortization expense of
intangible assets related to DIGEX. Capitalized technologies are
amortized over 8 years. All other intangible assets are being amortized
over 10 years.
(j) This adjustment represents the additional amortization expense that is
expected to be incurred in connection with the impending STFI
acquisition. For purposes of the pro forma presentation, it is assumed
that the excess of the purchase price over the net tangible assets
acquired will ultimately be allocated to identifiable intangibles such as
developed technology, customer lists and goodwill with the weighted
average amortization period of 20 years. The Company will fully
investigate the amount and appropriate amortization periods for
intangible assets and goodwill once the acquisition is consummated.
(k) This adjustment represents the elimination of interest expense in STFI's
historical financial statements related to the 12 1/4% Senior
subordinated Discount Notes purchased by the Company.
(l) This adjustment represents the elimination of preferred stock dividends
and accretions of STFI.
(m) This column represents the historical results of operations of Shared
Technologies Fairchild, Inc. for the nine months ended September 30,
1997.
F-8
